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May 14, 2019
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Feeling at Home, Money Matters

Should You Rent or Buy?

Umpqua Bank tips on renting vs buying a home

Your pros and cons checklist for renting vs. buying a home in 2019

Rising rents, absentee landlords, ugly wallpaper: At some point, nearly every renter has faced frustrations like these. If you’re planning to move in the near future—especially in an area with high housing costs—you’ve probably asked yourself: Should I buy or rent my home? The answer that’s right for you will rely on several factors, ranging from the practical to the very personal.

“It’s a question I get asked all the time,” admitted Abe Gates, a Senior Home Loan Officer at Umpqua Bank in Seattle. “And my answer is always this: it depends.”

“Whether you rent or buy, it all comes down to your personal circumstances,” agreed Jeff Stevens, a VP Branch Manager of Umpqua Home Lending in Sacramento. “Are you single or married? Saving for college or retirement? Do you love flexibility, or are you looking to put down roots? Those are all things worth thinking about.”

Like any big decision, it helps to weigh the pros and cons of buying and renting. Let’s look at renting first.

Benefits of renting a home

Flexibility and mobility: Most leases last for a year, but you can often negotiate a shorter one. That's a huge benefit of renting a home. Should you decide to travel or need to relocate for work, all you have to do is pack up and go.

Short-term savings: Renting usually costs less in the short-term because there are fewer upfront costs and no property taxes to worry about. It can be easier to save money when you rent.

No maintenance hassles: Renting means that if that if the furnace goes kaput, it’s not your problem—it’s the landlord’s. There are no lawns to mow, gutters to clean, or sinks to unclog either, so you can save money on maintenance.

Risks of renting a house or apartment

No property control: Want to paint your office neon blue? You’ll need to check with your landlord first. Same goes for hanging pictures, adopting a Great Dane puppy, or renovating the place to make it feel more like home.

No equity: Monthly rent payments don’t go towards ownership, nor do they build up equity that you can borrow against. Once you write that rent check every month, the money is gone. If you are planning to rent, use a rent calculator to help you figure out what you can afford.

Rent increases: When your lease runs out, your landlord is free to increase the rent—and they often do at a rate that outpaces inflation. This is especially true in competitive housing markets like Seattle and Portland. When considering whether to rent or buy, add rent increases into the equation.

Now, let’s look at the flip side of the debate.

Benefits of buying and owning a home

There are some pretty great reasons to buy your next home. With rents skyrocketing in cities like Portland, Seattle, Oakland and Sacramento, those reasons are adding up fast. Some advantages to buying a home are:

Financial stability: Unlike rent, which tends to increase regularly, with a fixed-rate mortgage your principal and interest rate will stay the same for the life of the loan. Use a mortgage calculator to figure out what those payments may look like. If you find the perfect fit for your budget, homeownership provides a sense of security that's appealing for anyone looking to put down roots or start a family.

Pride of ownership: Being a homeowner can feel empowering. You have a place to call your own and customize just the way want it. Paint the walls or knock them down – the choice is yours. The freedom of having a home where you can put down roots is priceless.

Building equity: Homes typically increase in value, building equity that you can use as a nest egg for your future. You can also leverage that equity by applying for a home equity line of credit, to make improvements to your home or cover unexpected costs.

Tax benefits: Several tax benefits cater exclusively to homeowners, allowing you to deduct things like mortgage interest and property taxes. It's one of the great benefits of buying a house vs. renting. Consult your tax advisor regarding the deductibility of interest.

Downsides of buying a house

Higher upfront costs: Saving for a down payment, closing costs, title insurance, and other fees can seem daunting. However, there are financial assistance programs for first-time homebuyers that can help. Here are a few tips on buying a house in 2019 to get you started.

Less flexibility: Unlike a lease that you can get out of after a year, when you own a home, you’re responsible for the mortgage until you can sell it to someone else.

More maintenance: Yard work, repairs, and renovations become your responsibility, whether you take the DIY route or hire someone else to do it.

It’s about more than just money

If you’ve been focused on crunching the numbers, step away from the spreadsheets for a moment and ask yourself a simple question: What feels right?

“Sure, you want to make a decision that’s a sound financial choice, but you also need to choose what fulfills you,” explained Abe. “I have one client with six dogs that she loves. It’s hard to find a rental for that many animals, so buying was the right choice for her. Another client is in a great band and needs a house where he can make noise. On the flip side of that, I have friends who don’t want to deal with maintaining a place, so renting is a better option for them. At the end of the day, what will create the most joy for you?”

Saving for the home you want

Choosing to rent or buy a home is a big financial decision that ultimately comes down to your own pros and cons list. Get real about how much you can afford and what you really want. Our Go-To financial experts are here to help you do the math and align your savings goals with your life goals.